EUROPEAN COMMISSION

Brussels, 7.9.2017 C(2017) 6041 final

In the published version of this decision, PUBLIC VERSION some information has been omitted, pursuant to articles 30 and 31 of Council This document is made available for Regulation (EU) 2015/1589 of 13 July 2015 information purposes only. laying down detailed rules for the

application of Article 108 of the Treaty on the Functioning of the European Union, concerning non-disclosure of information covered by professional secrecy. The omissions are shown thus […]

Subject: State Aid SA.43787(2017/N) – Investment aid to airport

Sir,

1. PROCEDURE

(1) By letter dated 23 March 2017, Germany notified the Commission of its intention to grant investment aid to . This investment aid is aimed at the consolidation of the airport as a "Code 4D airport" and at maintaining current airport capacity.

(2) By letter of 19 April 2017 the Commission requested further information, which was provided by Germany on 18 May 2017. On 7 July 2017, the Commission requested an extension of the deadline to adopt a decision at the latest by 10 September 2017, to which Germany agreed on 10 July 2017.

Seiner Exzellenz Herrn Sigmar GABRIEL Bundesminister des Auswärtigen Werderscher Markt 1 D - 10117

Commission européenne, B-1049 Bruxelles – Belgique Europese Commissie, B-1049 Brussel – België 2. DETAILED DESCRIPTION OF THE MEASURE

2.1 The beneficiary Memmingen Airport

(3) Memmingen airport is situated 3.8 kilometres from the town of Memmingen, in the Allgäu region, in the German Land . Until 1 January 2017, Memmingen airport was owned and operated by Allgäu Airport GmbH & Co. KG ("AAG"), which is owned by 76 different shareholders (74 private companies located in the region, mainly SMEs, and two local authorities).1 In the notification, Germany indicates that a new corporate structure was introduced at Memmingen airport per 1 January 2017, whereby AAG is transformed into "Besitzgesellschaft I", which will be the new beneficiary of the aid and will manage the airport core area ("Flughafenkernbereich"), the airfields ("Flugaffine Gewerbeflächen") and the expansion of security infrastructure ("Ausbau Sicherheitsinfrastruktur"). The new "Besitzgesellschaft I" currently owns 100% of a new "Besitzgesellschaft II" which owns lands which are not directly needed for the operation of the airport. AAG expects to sell 75% of the shares of "Besitzgesellschaft II" for around EUR 9.3 million. Furthermore, the operation of Memmingen airport will be transferred to a "Betriebsgesellschaft" (called "Flughafen Memmingen GmbH"), which will lease the airport facilities. Currently, AAG owns 100% of the shares of the "Betriebsgesellschaft", but it is expected that through capital increases of around EUR 2.4 million private companies will participate in the "Betriebsgesellschaft". It is expected that the corporate structure of Memmingen airport will look as follows:

(4) Memmingen airport is a conversion of the former military airfield Memmingerberg.2 The airport started its commercial passenger operation in 2004. Memmingen airport mainly operates a low cost business model, serving between 25-30 destinations, which are mainly holiday destinations in Southern Europe and Turkey. The most important airlines flying from Memmingen airport are and .

1 The public shareholders of AAG hold 7% of its shares, whereas the remaining 93% of shares are owned by private investors. 2 The public funding (EUR 7.3 million, 50% aid intensity) of the conversion project was approved by the Commission decision of 7 March 2007 in case N 620/2006 – Germany – Memmingen airport, OJ C 133, 15 June 2007, p. 8. 2 (5) Between 2005 and 2010, Memmingen airport experienced a significant increase in passenger traffic from around 4,700 passengers (mainly general aviation) in 2005 to 911.609 passengers in 2010. In the years 2011-2015, passenger numbers fluctuated. Nevertheless, in 2016, passenger numbers reached their peak at 996.714 passengers. The below graph contains the development of passenger numbers at Memmingen airport between 2005 and 2016.

Passengers 1200000

1000000

800000

600000 Passengers

400000

200000

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(6) The EBITDA of Memmingen airport has been positive over the last five years, which means Memmingen airport is able to cover its operating costs. The EBITDA over the last five years is included in the following table:

Table 1: EBITDA Memmingen airport

2012 2013 2014 2015 2016 (expected)

EBITDA 813,000 344,000 88,000 701,000 900,000 (EUR)

(7) The nearest airports to Memmingen airport are the following3:

• airport in Germany (approximately 91 km, or slightly over 60 minutes by car);

• airport in Germany (approximately 104 km, or 75 minutes by car);

3 All distances in road kilometres/travel time are based on the fastest route. Source: maps.google.com, accessed on 11 July 2017. 3 • airport in Germany (approximately 144 km, or 90 minutes by car);

• airport in Germany (approximately 138 km, or 95 minutes by car);

• Innsbruck airport in (approximately 182 km, or 140 minutes by car).

2.2 Description of the measure

(8) The notified measure consists of an increase in the aid amount and aid intensity of the investment project that the Commission approved in its Decision in case SA.363774 ("the 2013 Decision"). The legal bases for the aid grant are the following:

• The Budget of 2017/2018 of the Free State of Bavaria, Section 03 B ("Haushaltsplan 2017/2018 Einzelplan 03 B des Feistaates Bayern");

• The approval decision of the South Bavarian Aviation Authority dated 9 July 2004 ("Luftrechtliche Genehmigung des Luftamtes Südbayern vom 9. Juli 2004");

• The planning approval dated 1 March 2013;

• The operating licence of the airport pursuant to § 38 II No. 1 of the Air Traffic Licencing Regulation ("Betreiben des Flughafens gemäß § 38 Abs. 2 Nr. 1 Luftverkehrs-Zulassungs-Ordnung");

• Landesentwicklungsprogramm (LEP) Bayern 2013.

(9) The infrastructure project in question aims at completing the conversion of a former military airport into a civil aviation airport and includes in particular the following measures:

• Widening of the from 30 to 45 metres

• Construction of the storm water holding tank

• Installation of an Instrument Landing System (ILS) and lights CAT II/III (increasing the availability of the airport in bad weather conditions)

• Construction and modernisation of apron 2 north

• Adaptation of the luggage compartment

• Construction and modernisation of several taxiways and aprons

4 Decision of the Commission of 5 June 2013 in case SA.36377 – Germany – Financing of airport infrastructure at Memmingen airport, C(2013) 3194 final. 4 (10) These measures, especially the widening of the runway, will allow Memmingen airport to fulfil the applicable standards of the International Civil Aviation Organisation (ICAO) and the European Aviation Safety Agency (EASA) to continue operating as a "Code 4D" airport, which it currently does under a special exemption authorisation granted by the German Federal Transport Ministry ("the Exemption"). According to the information provided by Germany, the Exemption will in principle expire at the end of 2017. The classification as "Code 4D" airport is necessary to be able to accommodate the planes generally used by low-cost carriers.

(11) In the 2013 Decision, the Commission approved EUR 7.75 million of State aid, on a total investment of EUR 15.5 million (aid intensity 50%). However, the investment project has as yet not been carried out. The present notification indicates that the total investment costs of the project have increased by EUR 2.18 million (14.07%), to EUR 17.68 million in total. This increase is based on the price increases included in the building cost index of the Federal Statistical Office ("Statistisches Bundesamt") over the period 2013-2017. The table below contains a specification of the increases in costs for the project between 2013 and 2017:

Table 2: specification of the increases in costs for the project between 2013 and 2017

Measures Costs in 2013 Costs in 2017 (thousand EUR) (thousand EUR)

1 Widening of the runway […](*) […]

2 Storm water holding tank […] […]

3 ILS system and lights CAT […] […] II/III

4 Construction and modernisation […] […] of apron 2 north

5 Adaptation of the luggage […] […] compartment (security requirements)

6 Construction and modernisation […] […] of several taxiways and aprons

Total investment costs 15.500 17.680

(12) Furthermore, the notification indicates that because of the increased costs for the project, and the fact that the airport wishes to maintain a positive EBITDA, the amount of public financing of the project should increase from EUR 7.75 million to EUR 12.2 million. This would correspond to an increase in aid intensity from 50% in 2013 to 69% in 2017. Of the remaining costs of the investment project of EUR 5.5 million, EUR 4.7 million will be financed by own capital of AAG. The remaining EUR 800,000 will be financed through short term financing.

5 The fact that the share of own financing by AAG is reduced by EUR 3 million in comparison to 2013 is caused by the fact that AAG has had to bear the costs of litigation before the national courts regarding the investment project between 2013 and 2016.5 Furthermore, costs were incurred for legal-, tax- and economic auditing, which had to be borne by AAG. Thus, its financial position has been weakened since 2013, which leads to the need for more public financing.

(13) Germany calculated the capital cost funding gap of the investment project by taking the total expected positive and negative cash-flows over the lifetime of the assets into account. Germany estimates the average economic utilisation period of the assets to be 25 years and 5.7% to be an appropriate discount rate. On the basis of these assumptions, there is a positive cash-flow over the period 2017-2041 of EUR 16.4 million, a discounted cash-flow of EUR 4.7 million. With the negative cash-flow (investment costs) being EUR 17.68 million, the capital cost funding gap of the investment project is calculated at EUR 13 million.

Table 3: Capital cost funding gap with a 5.7% discount rate, in EUR million

Positive cash flow 4.7

Negative cash flow (including -17.7 investment project)

Capital cost funding gap (without -13 investment aid)

Public support 12.2

Capital cost funding gap (with investment - 0.8 aid)

3. ASSESSMENT OF THE MEASURE

3.1 Existence of aid

(14) By virtue of Article 107(1) of the TFEU "any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market."

(15) The criteria laid down in Article 107(1) TFEU are cumulative. Therefore, for a measure to constitute State aid within the meaning of Article 107(1) TFEU all of the following conditions need to be fulfilled. The financial support must:

(*) confidential information 5 This litigation related to the defence of the planning approval notice dated 1 March 2013 ("Erlass des Planfeststellungsbeschlusses am 01.03.2013").

6 • be granted by the State or through State resources,

• favour certain undertakings or the production of certain goods,

• distort or threaten to distort competition, and

• affect trade between Member States.

(16) In the following sections, the Commission will assess whether the measure as described above in chapter 2.2 meets these cumulative criteria and thus constitutes aid in the meaning of Article 107(1) TFEU.

3.1.1. Notion of undertaking and economic activity

(17) According to settled case law, the Commission must first establish whether Memmingen airport is an undertaking within the meaning of Article 107(1) TFEU. The concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed.6 Any activity consisting in offering goods and services on a given market is an economic activity.7

Notion of undertaking

(18) In the "Aéroports de Paris" judgment, the General Court stated that the operation of an airport, including the provision of airport services to airlines and to the various service providers within airports, is an economic activity.8 This was confirmed by the Court of Justice in its "-Halle airport" judgment, where it found that the operation of an airport for commercial purposes and the construction of airport infrastructure constitute an economic activity.9 Once an airport operator engages in economic activities, regardless of its legal status or the way in which it is financed, it constitutes an undertaking within the meaning of Article 107(1) TFEU, and the Treaty rules on State aid therefore apply.10

6 Judgment of the Court of Justice of 18 June 1998, Commission v Italy, C-35/96, ECLI:EU:C:1998:303, para. 36; Judgment of the Court of Justice of 23 April 1991, Höfner and Elser, C-41/90, ECLI:EU:C:1991:161, para. 21; Judgment of the Court of Justice of 16 November 1995, Fédération Française des Sociétés d'Assurances v Ministère de l'Agriculture et de la Pêche, C-244/94, ECLI:EU:C:1995:392, para. 14; Judgment of the Court of Justice of 11 December 1997, Job Centre, C-55/96, ECLI:EU:C:1997:603, para. 21. 7 Judgment of the Court of Justice of 16 June 1987, Commission v Italy, 118/85, ECLI:EU:C:1987:283, para. 7; Judgment of the Court of Justice of 18 June 1998, Commission v. Italy, C-35/96, ECLI:EU:C:1998:303, para. 36. 8 Judgment of the General Court of 12 December 2000, Aéroports de Paris v Commission, T-128/98, ECLI:EU:T:2000:290, confirmed by the Judgment of the Court of Justice of 24 October 2002, Aéroports de Paris v Commission, C-82/01P, ECLI:EU:C:2002;617. 9 Judgment of the Court of Justice of 19 December 2012, Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission, C-288/11P,ECLI:EU:C:2012;821; see also Judgment of the Court of Justice of 24 October 2002, Aéroports de Paris v Commission, C-82/01P, ECLI:EU:C:2002;617 and Judgment of the General Court of 17 December 2008, Ryanair v Commission, T-196/04, ECLI:EU:T:2008:585. 10 Judgment of the Court of Justice of 17 February 1993, Poucet v AGV and Pistre v Cancave, C-159/91 and C-160/91, ECLI:EU:C:1993:63. 7 (19) The Commission notes that the airport infrastructure and equipment are operated by AAG11, which is the beneficiary of the notified public funding. AAG charges airlines as well as general aviation fees for the use of the infrastructures, and thus exploits the airport commercially. It follows that AAG constitutes an undertaking for the purpose of Article 107(1) TFEU.

Economic activity

(20) While AAG must be considered to constitute an undertaking for the purpose of Article 107(1) TFEU, it must be recalled that not all the activities of an airport operator are necessarily of an economic nature.12

(21) As explained in point 35 of the Aviation Guidelines13 ("the Aviation Guidelines"), activities that normally fall under State responsibility in the exercise of its official powers as a public authority are not of an economic nature and do not fall within the scope of the rules on State aid.

(22) However, the infrastructure, which is the subject of the present decision, will be operated on a commercial basis by the airport manager AAG. AAG will charge users for the use of this infrastructure, which means the infrastructure is commercially exploitable and that the public financing of the infrastructure project finances the economic activities of the airport operator.

3.1.2 Use of state resources and imputability to the State

(23) The investment aid in question is granted by the German Land Bavaria from its budgetary resources. The funding is thus imputable to the State and involves State resources.

3.1.3 Economic advantage

(24) The investment aid in question – granted directly from the Bavarian State budget and provided without any remuneration – reduces the investment costs that the airport operator would normally have to bear if it wanted to expand or otherwise invest, and therefore it confers an economic advantage to the airport. As the investment aid is granted without any remuneration or return, a profit-driven market economy operator would not have granted the measure under the same terms and conditions. Therefore, the investment aid does not comply with the market economy operator principle and confers an economic advantage on AAG.

3.1.4 Selectivity

(25) Article 107(1) TFEU requires that, in order to constitute State aid, a measure must favour "certain undertakings or the production of certain goods". The Commission notes that the public funding in question will be granted to Memmingen airport (AAG) only. Therefore, the measure is selective within the meaning of Article 107(1) TFEU.

11 In the new structure: Besitzgesellschaft I. 12 Judgment of the Court of Justice of 19 January 1994 SAT Fluggesellschaft v Eurocontrol, , C-364/92, ECLI:EU:C:1994:7. 13 OJ C 99, 4.4.2014, p.3. 8 3.1.5 Distortion of competition and effect on trade

(26) When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in the internal market, the latter must be regarded as affected by that aid. In accordance with settled case law14, for a measure to distort competition it is sufficient that the recipient of the aid competes with other undertakings on markets open to competition.

(27) There is competition between airports in the internal market to attract airlines; also relatively small airports such as Memmingen airport compete on this basis. The Commission notes in this respect that the main carriers operating at Memmingen airport are Ryanair and Wizz Air, airlines operating across the Union. The investment aid in question will allow Memmingen airport to continue operating as a "Code 4D" airport fulfilling all relevant requirements instead of on the basis of the Exemption. In view of the above, the measure at stake is capable of affecting competition between airports by strengthening the attractiveness of Memmingen airport for air carriers. Therefore, the public funding under examination distorts or threatens to distort competition and affects trade between the Member States on the market for provision of airport services.

3.1.6 Conclusion on the existence of State aid

(28) The Commission concludes that the notified investment aid constitutes State aid within the meaning of Article 107(1) TFEU.

3.2 Lawfulness of the aid

(29) Germany notified the investment aid to Memmingen airport to the Commission on 23 March 2017. Article 108 (3) TFEU and Article 3 of the Procedural Regulation15 contain a standstill obligation providing that notifiable aid shall not be put into effect before the Commission has taken, or is deemed to have taken, a decision authorising such aid.

(30) To the Commission's knowledge, the notified investment aid to Memmingen airport has not yet been put into effect. Hence, the Commission concludes that the standstill obligation has been respected and the aid in question is lawful.

3.3 Compatibility of the aid

3.3.1. Basis for assessing the compatibility of the aid with the internal market

(31) Article 107(3)(c) TFEU stipulates that aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest may be considered to be compatible with the internal market.

(32) With the notified State aid, Germany intends to finance an investment project relating to the airport infrastructure of Memmingen airport. The Aviation

14 Judgment of the General Court of 30 April 1998, Het Vlaamse Gewest v Commission, T-214/95, ECLI:EU:T:1998:77. 15 Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (codification), OJ L 248, 24.9.2015, p. 9–29 (the "Procedural Regulation"). 9 Guidelines provide for principles to assess, among others, the compatibility of an investment aid to airports with the internal market.

(33) Point 79 of the Aviation Guidelines stipulates cumulative common assessment principles that a State aid measure has to respect in order to be found compatible with the internal market:

a. contribution to a well-defined objective of common interest;

b. need for State intervention;

c. appropriateness of the aid measure;

d. incentive effect;

e. proportionality of the aid (aid limited to the minimum);

f. avoidance of undue negative effects on competition and trade between Member States;

g. transparency of the aid.

3.3.2. Compatibility assessment

(34) Investment aid granted to airports will be considered compatible with the internal market pursuant to Article 107(3)(c) TFEU provided that the cumulative conditions mentioned above are fulfilled as set out in points 84 to 108 of the Aviation Guidelines. Compatibility with these criteria is assessed below.

Contribution to a well-defined objective of common interest

(35) As described in recitals 32 to 34 of the 2013 Decision, "the main aim of the financing of the infrastructure project in question is to improve the accessibility of the region, and thus to stimulate the regional development and creation of new jobs". According to the information provided by Germany concerning the importance of the airport for tourism in the region, employment and the regional economy, the arguments put forward in these recitals of the 2013 Decision are still accurate for the present notification.

(36) Furthermore, the Commission notes that there is one other airport located within the same catchment area as Memmingen airport. The “catchment area” is defined in point 25(12) of the Aviation Guidelines as "a geographic market boundary that is normally set at around 100 kilometres or around 60 minutes travelling time by car, bus, train or high-speed train; however, the catchment area of a given airport may be different and needs to take into account the specificities of each particular airport. The size and shape of the catchment area varies from airport to airport, and depends on various characteristics of the airport, including its business model, location and the destinations it serves".

(37) As indicated in recital (7), is located at approximately 91 km, or slightly over 60 minutes by car from Memmingen airport. This means that Friedrichshafen airport is located just within the catchment area of Memmingen airport.

10 (38) Nevertheless, the investment project in question does not lead to the duplication of unprofitable airports or to the creation of additional unused capacity within the meaning of point 85 of the Aviation Guidelines. As regards the duplication of unprofitable airports, it is recalled that Memmingen airport has had a positive EBITDA over the past five years (see recital (6)). The same is true for Friedrichshafen airport. The EBITDA of Friedrichshafen airport over the period 2011-2015 is included in the following table:

Table 4: EBITDA Friedrichshafen airport

2011 2012 2013 2014 2015

EBITDA 1,420,000 2,074,000 2,328,000 2,748,000 1,883,000 (EUR)

(39) As both Memmingen and Friedrichshafen airports, based on the information available to the Commission, are not unprofitable, the investment aid to Memmingen airport would not lead to the duplication of unprofitable airports.

(40) Furthermore, the investment project in question is not "primarily aimed at creating new airport capacity" within the meaning of point 85 of the Aviation Guidelines. In view of the wording of point 85 of the Aviation Guidelines, the Commission considers that the question of whether additional capacity is created at the airport has to be assessed by reference to today’s situation. The investment project will only allow Memmingen airport to continue operating as a "Code 4D" airport as it already does today on the basis of the Exemption. The investment project would thus ensure that Memmingen airport fulfils the relevant ICAO security standards required to operate as a "Code 4D" airport (such as the width of the runway) without having to rely on an exemption authorisation. As Memmingen airport until today operates as a Code 4D airport, albeit based on the Exemption, its capacity would not be increased. Germany estimates that the maximum capacity of Memmingen airport both before and after the investment project is approximately 2.1 million passengers per year, which means no additional capacity will be created at the airport due to the investment project in comparison to the current situation. Since the investment project does not create new airport capacity at Memmingen airport, it also does not lead to the creation of additional capacity within the meaning of point 85 of the Aviation Guidelines. As such, an assessment of the medium term prospects of the airports in the catchment area, as described in points 85 and 86 of the Aviation Guidelines, is not required.

(41) On this basis, the Commission concludes that the investment aid to Memmingen airport meets a clearly defined objective of common interest.

Need for State intervention

(42) The Aviation Guidelines determine that State aid should be targeted towards situations where such aid can bring about a material improvement that the market itself cannot deliver. According to point 89(b) of the Aviation Guidelines, airports like Memmingen airport with annual passenger traffic of between 200,000 and 1 million are usually not able to cover their capital costs to a large extent.

11 (43) The investment project in question is necessary to complete the conversion of a former military airbase into a civil aviation airport, and will allow Memmingen airport to continue operating as a "Code 4D" airport, whilst fulfilling all ICAO safety requirements linked to such qualification. Thus, Memmingen airport will be able to continue accommodating the planes of low-cost carriers, on which its business model is based. Germany furthermore substantiates that the investment aid in question will allow Memmingen airport to further develop itself in such a way that it will in future be able to bear its own investment costs.

(44) The Commission considers that State intervention is necessary in order to ensure that Memmingen airport will be able carry out the investment project in question, so that it can continue operating as a "Code 4D" airport which is able to cover its own operating expenses and will, in future, also be able to cover its investment costs.

Appropriateness of the aid measure

(45) Pursuant to point 90 of the Aviation Guidelines, Member States must demonstrate that the aid measure is an appropriate policy instrument to achieve the intended objective or to resolve the problems intended to be addressed by the aid. An aid measure will not be considered compatible with the internal market if other less distortive policy instruments or aid instruments allow the same objective to be reached.

(46) Germany has shown that investment aid in the form of a direct grant in the amount of EUR 12.2 million combined with EUR 4.7 million of the costs being financed by own capital of AAG and EUR 800,000 being financed through short term financing is an appropriate manner to finance the present investment. The amount of EUR 12.2 million public financing is necessary as Memmingen airport would not be able to undertake the necessary future investments into the airport if it would have to bear interests and repayments of a larger loan. Having to obtain more financing from the market would thus limit the future development of Memmingen airport.

(47) Therefore, the Commission considers that the investment aid in question is appropriate to reach the desired objective of common interest.

Incentive effect

(48) Point 93 of the Aviation Guidelines requires that works on an individual investment have not started before an application has been submitted to the granting authority. Point 94 of the Aviation Guidelines requires that it needs to be verified that the project is not economically attractive in its own right and that the investment would not have been undertaken or would not have been undertaken to the same extent without any State aid. Point 95 of the Aviation Guidelines then says that the incentive effect is established through a counterfactual analysis.

(49) The works on the investment project have not yet started.

(50) Germany has demonstrated that Memmingen airport could not reasonably undertake the investment project without the investment aid, considering the impact that obtaining financing on the market would have on the future of the airport. Without the investment aid, the investment would not be carried out to the

12 same extent and, consequently, Memmingen airport would stop meeting the standards to operate as a "Code 4D" airport, in particular the runway width of 45 m, once the exemption authorisation for the 30m runway is not prolonged or withdrawn (see recital 9). The status of a “Code 4D” airport is, however, necessary to accommodate the aircraft typically used by low cost carriers, such as Boeing B 737-800, Airbus A 320 and Airbus A 321. Therefore, the business model of the airport would become void in the absence of the “Code 4D” status and the airport would risk closure.

(51) As indicated in recital (13) above, the capital cost funding gap calculated by Germany is EUR 13 million. The investment aid of EUR 12.2 million does not exceed the capital cost funding gap. Taking into account the investment aid, the capital cost funding gap over the lifetime of the investment in terms of the difference between the positive and negative cash flows in net present value terms, is EUR -800,000. This shows that the investment is not economically attractive in its own right.

(52) In conclusion, the aid has an incentive effect on Memmingen airport, as the investments would not be undertaken (to the same extent) without the aid in question.

Proportionality of the aid (aid limited to the minimum)

(53) Point 97 of the Aviation Guidelines stipulate that the maximum permissible amount of State aid is expressed as a percentage of the eligible costs (the maximum aid intensity) and that the eligible cost are the costs relating to the investments in airport infrastructure, including planning costs, ground handling infrastructure (such as baggage belt, etc.) and airport equipment..

(54) For airports with less than one million passengers, like Memmingen airport16, the maximum aid intensity is 75% as set out in point 101 of the Aviation Guidelines.

(55) As mentioned in recital (9) above, the aid will be allocated to investment in airport infrastructure. The Commission therefore notes that the aid will be used to finance eligible costs.

(56) As stated in recital 0 above, the aid intensity of the measure is limited to 69% of the eligible costs, which makes that it fulfils the requirements of the aid intensity as laid down in point 101 of the Aviation Guidelines.

(57) According to point 99 of the Aviation Guidelines, the investment aid to airports must be limited to the extra costs (net of extra revenues) which result from undertaking the aided project rather than the alternative project that the beneficiary would have undertaken in the counterfactual scenario in which it would not have received the aid. Where no specific counterfactual is known the amount of aid should not exceed the funding gap of the investment project (so- called "capital cost funding gap"), which is determined on the basis of an ex ante

16 According to footnote 88 of the Aviation Guidelines, the relevant passenger number is the actual average annual passenger traffic during the two financial years preceding that in which the aid is notified or actually granted. The passenger numbers at Memmingen airport are 883,490 in 2015 and 996,714 in 2016, which means an average of 940,102 in the two financial years preceding the notification.

13 business plan as the net present value of the difference between the positive and negative cash flows (including investment costs) over the lifetime of the investment.

(58) In the present case, no alternative project is known that would have been undertaken without the aid. In the absence of aid, the airport would not be able to make the necessary investments.

(59) The business plan on the basis of which the capital cost funding gap was calculated took into account all aeronautical and non-aeronautical revenues expected to be generated by the investment project over its presumed 25-year lifetime, using an appropriate discount rate of 5.7%. As also indicated in recital 13 above, the discounted capital cost funding gap amounts to EUR 13 million. The discounted value of the aid of EUR 12.2 million does not exceed the funding gap.

(60) On the basis of the above, the Commission concludes that the aid is proportional and limited to the minimum.

Avoidance of undue negative effects on competition and trade between Member States

(61) Points 106 to 108 of the Aviation Guidelines indicate that when assessing the compatibility of investment aid the Commission will take account of the distortions of competition and the effects on trade. In this framework, it is first of all reiterated that the investment aid would not lead to the duplication of unprofitable airports or the creation of additional unused capacity in the catchment area.

(62) The Commission notes that the aid does not lead to the duplication of unprofitable airports as neither Memmingen airport nor Friedrichshafen, which is within the catchment area, are unprofitable. Furthermore, the aid ensures that Memmingen airport can continue operating its business model by formalising the status as “Code 4D” airport. De facto, however, the situation of the airport will not change as – based on the Exemption – Memmingen operates already now as “Code 4D” airport. Therefore, the aid does not lead to the creation of additional unused capacity (see recitals (36) to (41) above).

(63) In conformity with point 107 of the Aviation Guidelines, the aid amount is set as a fixed amount to cover eligible investment costs. Furthermore, Memmingen airport is open to all potential users and is not dedicated to one specific user (compare point 108 of the Aviation Guidelines).

(64) Point 108 of the Guidelines specifies that in order to further limit any distortions, the airport, including any investment for which State aid is granted, must be open to all potential users and must not be dedicated to one specific user.

(65) The airport currently hosts 9 airlines. Its aim is to attract as many tourists as possible and it is therefore and will remain, open to all carriers.

(66) On this basis, the Commission considers that the undue negative effects on competition and trade between Member States are limited to the minimum.

14 Cumulation of aid

(67) Pursuant to point 159, aid authorised under the Aviation Guidelines may not be combined with other State aid, de minimis aid or other forms of Union financing, if such a combination results in an aid intensity higher than the one laid down in these Guidelines.

(68) The German authorities have confirmed that the aid granted under the Aviation Guidelines will not be cumulated with any other aid.

Transparency of the aid

(69) Germany commits to comply with the rules on transparency as provided for in points 162 and 163 of the Aviation Guidelines and amended by the “Transparency Communication”.17 The information will be published on the Commission’s State aid transparency module website https://webgate.ec.europa.eu/competition/transparency/public?lang=en.

Conclusion

(70) In view of the above assessment, the Commission considers that the notified investment aid to Memmingen airport is in accordance with the compatibility conditions set out in the Aviation Guidelines. Hence, the operating aid is compatible with the internal market on the basis of Article 107(3)(c) TFEU.

4. CONCLUSION

The Commission has accordingly decided not to raise objections to the aid on the grounds that it is compatible with the internal market pursuant to Article 107(3)(c) of the Treaty on the Functioning of the European Union.

If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/competition/elojade/isef/index.cfm.

17 Communication from the Commission amending the Communications from the Commission on EU Guidelines for the application of State aid rules in relation to the rapid deployment of broadband networks, on Guidelines on regional State aid for 2014-2020, on State aid for films and other audiovisual works, on Guidelines on State aid to promote risk finance investments and on Guidelines on State aid to airports and airlines, OJ C 198, 27.6.2014, p. 30–34. 15 Your request should be sent electronically to the following address:

European Commission, Directorate-General Competition State Aid Greffe B-1049 Brussels [email protected]

Yours faithfully For the Commission

Margrethe VESTAGER Member of the Commission

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